There has been alot of discussion lately about the need for the LINK token price to be high in order to have enough collateral available for nodes to put up/stake for high value contracts. This makes alot of sense and I am on board with this line of thought. It actually makes the network more secure when the nodes put up alot of collateral since it brings more trust, security, and financial incentives to the network.
However, one user raised a point about price fluctuations of token affecting the transaction. He said:
“I think the risks of effectively holding an illiquid proprietary token by having your collateral denominated in it will be a problem for customers. How much "more" LINK tokens is enough? The price could go anywhere anytime, especially with the amount of supply out of circulation.
So you think the node operators would offer collateral in fiat, and convert their penalty payment from LINK to fiat for their customers? Then they would be incentivized to hold their collateral in fiat, not LINK, having to work around an awkward system of having to convert their penalty payments into LINK and back to fiat.”
So say I put up a million dollars worth of LINK as collateral but a few months later that is not worth 500k or 1.2M. That is a big difference in price, especially with the crypto market young. Also, some of these contracts might take awhile to play out so a lot can happen over a long period of time, especially in crypto. The affects both the node operators expenses and the smart contract participants demanding a certain fiat amount of collateral in case they get bad data (basically like insurance for them).
Because of this dilemma, there needs to be mechanisms/tools in place whereas the price can be tied down to something so costs and pricing are stable over the length of the contract. I had two ideas about this.
1. Smart Contract gas costs and Oracle costs will likely appear in the normie user interface under whatever currency they want to operate in, whether that is fiat, link, or crypto. OpenLaw has already stated they are making contract templates that have fixed USD costs and they take care of the crypto payments for clients. Basically a DEX or some third party could do the link token and eth gas transactions for them in the background so essentially the consumer would never touch the token. It’s all in the background.
2. However, this model of USD pricing still means the node operators could have fluctuating link token expenses, which is worrisome. Therefore, it would make sense to have a derivatives market for LINK, where node operators can use to hedge against price fluctuations. This market could also be available to smart contract participants as in hedging the dollar value of the collateral in the contract based off links price.
Gabriel James
The Market Protocol partnership could help make a derivative based off the link token that is tied down to a stable coin. Also, we know Ari Juels is working on Project Chicago, which if I remember correctly was trying to build a derivative for eth, so gas prices could be more easily calculated and costs for companies could then be budgeted more accurately.
Largely accurate. The penalty stake will be set at a fiat price, it doesn't make sense to do in a LINK price. Bear in mind that one of the things CL can do is use their own token pool to mitigate volatility by controlling supply, both through releasing tokens and by buying them back.
Joshua Wood
Yeah like a market maker. I think though they could use derivatives better. Also, if big players like swift sue the token, that is instant credibility to the token
Anthony Butler
I dont mean to be a debbie downer but aren't some of you guys been too optimistic with the whole swift using link meme?
>the financial industry is infamous for being slow to change and adopt new technologies. >decentralized networks are still on shaky ground as far as security and proven track record >by all measures banks don't seem to like cryptos/decentralized tech as of right now >Any decentralized project can be forked and reworked to get rid of things like native tokens/too much decentralization.
In my opinion LINK doesn't need swift, nor big players. Just be live and work reliably. From there all it will take is 1 successful smart contract using its capabilities.
Jonathan Lee
I don't think it's so much about whether they have an ongoing working relationship as what the extent of that relationship is. I do think people get too hung up on SWIFT specifically, though, Chainlink doesn't live or die on it by any means.
I agree that data providers are the meat of ChainLink and we don't even need them. However, I think Swift needs Link to monetize access to their customer accounts and swipe revenue off of that by running nodes that give api access to accounts. They will become irrelevant if they don't adapt.
